Roundy’s Investors Fight Merger With Kroger

MILWAUKEE (CN) – Kroger’s plan to buy Roundy’s Inc., the Milwaukee area’s largest grocery chain, for $800 million prompted two shareholder class actions in Wisconsin. When Roundy’s and Ohio-based Kroger announced the deal on Nov. 11, they said the share price “represents a premium of approximately 65% to the Roundy’s closing share price on November 10, 2015.” Roundy’s may have closed at $2.18 a share on Nov. 10, but shareholders Michael Ringwood claims that “the merger consideration represents a huge discount to Roundy’s high in just the past six months of more than $5.00 per share.” Indeed Kroger has been interested in Roundy’s for nearly a year, “but held off until it could purchase Roundy’s at a bargain basement price,” the Nov. 16 complaint states. On the same day Ringwood filed suit in Milwaukee County Circuit court, shareholder Christopher Janner filed a separate lawsuit in the same court. John Blythin with Ademi & O’Reilly in Cudahy, Wis., filed both complaints for the shareholders. Ringwood’s is the Top Download for Courthouse News on Wednesday. Roundy’s shareholders contend that Kroger’s acquisition involves a series of underhanded agreements and unfair benefits at the expense their expense. In addition to restricting Roundy’s’ ability to solicit better offers, the deal comes with “unfettered” access for Kroger to details about competitive proposals and “an unreasonably high cash termination fee of $20 million,” according to the complaint. Kroger’s has also agreed to keep Roundy’s CEO Robert Mariano at the helm once the merger completes. “Thus, it appears that defendant Mariano used the sales and negotiation process to secure personal benefits for himself, to the detriment of Roundy’s public stockholders,” Ringwood claims. Other executives and board members “will receive windfall profits by way of automatic vesting of restricted stock units and ‘golden parachute,'” thanks to the merger’s effect on their employment contracts, Janner claims in his complaint. The shareholders say voting agreements in place with these parties guarantee the successful completion of the merger. “With the members of the board already committed to consummating the merger, in addition to those outstanding shares already committed by way of voting agreements, the completion of the transaction is a fait accompli,” Janner’s complaint states (italics in original). Roundy’s operates stores under the Pick ‘n Save, Metro Market and Copp’s banners in the Milwaukee area, plus Mariano’s stores in Chicago. Kroger’s stores include Food 4 Less, City Market and Dillon’s. They operate in 34 states and Washington, D.C., according to Janner’s complaint. Ademi, the attorney for both shareholders, was not in the office and did not return a voicemail left on Wednesday. Kroger spokesman Keith Dailey did not immediately respond to voicemail messages left with his office and cellphone Wednesday. Roundy’s legal team took a message but did not immediately return a call Wednesday.